BRC-20 is a fungible token standard built on the Bitcoin blockchain, inspired by Ethereum’s ERC-20 standard. It leverages the Ordinals protocol to inscribe token data directly onto Bitcoin transactions, enabling the creation, transfer, and management of fungible tokens without requiring smart contracts. BRC-20 represents a significant innovation in Bitcoin’s ecosystem, expanding its utility beyond a store of value to include tokenized assets.
What Is BRC-20?
BRC-20 is a token standard designed to enable fungible tokens on the Bitcoin blockchain. Unlike Ethereum’s ERC-20, which relies on smart contracts, BRC-20 uses the Ordinals protocol to inscribe token data onto Bitcoin transactions. This inscription process embeds metadata into Bitcoin’s blockchain, allowing users to mint, transfer, and manage tokens directly on the network.
The BRC-20 standard was created to explore Bitcoin’s potential for hosting tokenized assets, a capability traditionally associated with blockchains like Ethereum. While still in its experimental phase, BRC-20 has gained traction as a novel way to expand Bitcoin’s functionality.
Who Created BRC-20?
The BRC-20 standard was introduced by an anonymous developer known as “Domo” in March 2023. Domo created BRC-20 as an experimental protocol to test the feasibility of fungible tokens on Bitcoin using the Ordinals protocol.
The development of BRC-20 was not backed by any major organization or foundation but emerged from the broader Bitcoin and Ordinals communities. Its creation reflects the grassroots innovation often seen in the blockchain space, where developers experiment with new ideas to push the boundaries of existing technologies.
When Was BRC-20 Introduced?
BRC-20 was introduced in March 2023, shortly after the Ordinals protocol gained popularity in early 2023. The timing coincided with a surge of interest in expanding Bitcoin’s use cases beyond its traditional role as a decentralized currency and store of value.
The rapid adoption of Ordinals for creating non-fungible tokens (NFTs) on Bitcoin set the stage for BRC-20’s development. By leveraging the same inscription mechanism, BRC-20 extended the Ordinals protocol to support fungible tokens, marking a new chapter in Bitcoin’s evolution.
Where Does BRC-20 Operate?
BRC-20 operates exclusively on the Bitcoin blockchain. It utilizes Bitcoin’s base layer for transaction validation and security, ensuring that all token-related activities benefit from the network’s robust decentralization and immutability.
The tokens are inscribed directly onto Bitcoin transactions using the Ordinals protocol, which embeds metadata into Bitcoin’s blockchain. This approach eliminates the need for sidechains or Layer 2 solutions, keeping all token data within Bitcoin’s main ledger.
Why Was BRC-20 Created?
BRC-20 was created to explore Bitcoin’s potential for hosting fungible tokens, a feature traditionally associated with smart contract-enabled blockchains like Ethereum. The goal was to demonstrate that Bitcoin could support tokenized assets without requiring complex smart contracts or additional layers of infrastructure.
The introduction of BRC-20 also aimed to expand Bitcoin’s utility, attracting developers and users interested in tokenization. By enabling fungible tokens, BRC-20 opens the door to new use cases, such as decentralized finance (DeFi), tokenized assets, and community-driven projects, within the Bitcoin ecosystem.
How Does BRC-20 Work?
BRC-20 relies on the Ordinals protocol to inscribe token data onto Bitcoin transactions. The process involves embedding JSON (JavaScript Object Notation) data into Bitcoin’s blockchain, which defines the token’s properties, such as its name, supply, and minting rules.
Here’s how BRC-20 works:
- Token Deployment: A user inscribes a JSON file onto the Bitcoin blockchain, defining the token’s parameters, such as its name, symbol, and total supply.
- Minting: Users can mint tokens by following the rules specified in the token’s inscription. This involves creating additional inscriptions that record the minting process.
- Transfer: Tokens are transferred by inscribing metadata that specifies the sender, recipient, and amount. These inscriptions are included in Bitcoin transactions, ensuring they are recorded on the blockchain.
Since BRC-20 does not use smart contracts, all token-related activities are managed through inscriptions and Bitcoin’s native transaction capabilities. This simplicity makes BRC-20 accessible but also limits its functionality compared to more advanced token standards like ERC-20.
In summary, BRC-20 represents a groundbreaking experiment in expanding Bitcoin’s capabilities. By enabling fungible tokens through the Ordinals protocol, it has introduced new possibilities for the Bitcoin ecosystem while highlighting the network’s versatility and potential for innovation.
